Understanding the 50-Year Mortgage Proposal

President Donald J. Trump's administration has suggested a new idea to make homes more affordable: allowing mortgages that last 50 years instead of the usual 30 years.

This proposal aims to help people manage today’s high home prices.
 

How Would a 50-Year Mortgage Work?

The main idea is to spread out loan payments over a longer time. If you borrow money for your house and pay it back over 50 years, your monthly payments will be lower than with a 30-year mortgage.

For example, if someone takes out a $360,000 loan (with a $400,000 home and 10% down) at a 6.25% interest rate, their monthly payment could be about $250 less with a 50-year loan compared to a 30-year loan.
 

The True Cost Over Time

While lower monthly payments may sound good, it's important to look at the total cost. Over 50 years, the total interest you pay could be much higher.

In some cases, interest payments might reach around $816,000 with a 50-year mortgage, compared to $438,000 with a 30-year loan.
 

Major Concerns With 50-Year Mortgages

Experts have pointed out several issues:
 

• Building Equity Slowly: With longer loans, most of your early payments go toward interest, not the loan itself. This means you won’t own much of your home for many years.
• Much Higher Interest Payments: Even if the interest rate is the same, you'll pay far more in total interest. For example, you could pay $523,000 more in interest compared to a 30-year mortgage.
• Housing Supply Issues: Some economists worry that just making loans longer doesn’t solve the real problem, which is not enough houses for sale. If more people can buy, but there aren’t enough homes, prices could go up, canceling out the benefit of lower payments.

 

Other Challenges

Currently, federal housing rules don’t allow many 50-year mortgages. These loans would need major changes in regulations to become widely available.
 

Who Might Benefit?

A 50-year mortgage could help people who have a tight budget or have trouble qualifying for a regular loan, since their payments would be smaller.

For example, with a 6.5% rate, the 50-year payment could be about $2,819 each month, compared to $3,079 for the 30-year option.

But if you plan on keeping your home for many years, want to pay off your mortgage before retirement, or hope to build equity quickly, a 50-year loan could hurt your long-term financial health.

You might end up paying until you are much older and have very little ownership in your house until the last years of the loan.
 

Bottom Line

The proposed 50-year mortgage may help with affordability in the short term, but buyers need to think about their plans for the future.

Lower payments now could mean paying much more over time and building ownership in your home more slowly. It's important to carefully consider your future goals before choosing this type of mortgage.

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